By Helen Greenwood

The restaurant, run by the chef and owner Tetsuya Wakuda, now has two chef's hats instead of three. Once dubbed ''the temple of high gastronomy'', Tetsuya's has been awarded the top prize of three hats by the Good Food Guide every year since 1992.

The Sydney restaurant is one of Australia's best-known, and recognised internationally as No. 38 on the San Pellegrino World's 50 Best Restaurants list. Tourists flock there and locals wait patiently for bookings taken months ahead. Tetsuya's was declared the winner of the People's Choice Awards for this year's Good Food Guide.

''There's no question that it is still a very good restaurant,'' said Terry Durack, the co-editor of the Good Food Guide.

''There is no question that a lot of people who haven't been there before will go and find it special. In fact, the restaurant has hardly changed at all. However, the world around it has changed immensely. You don't get the same sense of wonderment and surprise that used to be part and parcel of dining at Tetsuya's.''

Joanna Savill, also a co-editor of the Good Food Guide, said: ''This decision was not made lightly. It took seven different reviews and a lot of serious, careful discussion to reach this decision. Tetsuya remains one of Sydney's and the world's great chefs and we continue to admire him greatly for all he has done, and will continue to do, for Sydney dining.''

Wakuda, a beloved figure in the Sydney food scene, is held in high esteem by the world's top chefs such as Heston Blumenthal in Britain and Ferran Adria in Spain.

The man who mentored Wakuda, Tony Bilson, suffered the same fate last night, Bilson's also dropping from three hats to two.

This is the first time that three restaurants have lost a third hat in the one year. Greg Doyle at Pier, who recently took his three-hatted seafood restaurant down several gears, has earned one chef's hat in this year's book. Just three restaurants, Marque, Est and Quay, wear the three-hat crown.

''It was time to re-evaluate the status of the three hats,'' Durack said. ''We are looking at a year in which Sydney is getting real, and it's not all about the pointy end of the dining scale. The way Sydney is dining is being driven more and more from the in-between ground, not the top end or the lower end. We're looking to find people who are pushing things forward to give us the Sydney we want.''

The Good Food Guide's three-hat accolade is hard to win and hard to keep. The best of the best have slipped from time to time.

Last year Chui Lee Luk's iconic Woollahra restaurant Claude's dropped from three hats to two. Her predecessor at Claude's, Tim Pak Poy, suffered the same fate in 1998 and bounced back after two years to regain the third toque.

Neil Perry has famously lost and gained more hats than Gai Waterhouse in a stiff breeze.

He said last night he didn't understand Tetsuya's demotion. ''Paul Bocuse can have three stars for 40 years doing the same food. It's hard to fathom.''

The demotion of Perry's signature restaurant, Rockpool, from three to two hats a decade ago caused a furore. Forty chefs, restaurateurs and suppliers protested about his treatment.

The next year Rockpool regained its three-hat status. Perry has since shifted Rockpool's style and has two hats in this year's Good Food Guide.

Wakuda recently opened Waku Ghin, a 25-seater restaurant in the Marina Bay Sands complex, Singapore, with a sake bar and a 3000-bottle wine cellar.

''It sounds to me that Tetsuya in Singapore is exciting, that he is revitalised,'' Durack said. ''Here he is doing what he thinks is expected of him. The Tets in Singapore, that's the Tets we want in Sydney. It's the Tets that Sydney deserves.''

Chef of the Year

The 2011 Emirates Chef of the Year Award went to Martin Benn, chef and co-owner of Sepia, and former understudy to Wakuda.

Sepia only opened for business in May last year, taking over a ground floor space that was previously a showroom for Nestle products in a large commercial complex in downtown Sussex Street.

In his review of Sepia in Tuesday's Good Living, the Herald's Terry Durack praises Benn and his co-chef Daniel Puskas for their cooking which he describes as "precise, pulled back, almost subversively feminine".

Good Food Guide

This year's guide is the culmination of seven month's work during which time the 40-strong reviewing team checked out more than 1000 restaurants, bars and eateries.

They elevated 15 new restaurants to one-hat status and added 31 new restaurants to a book of 950-plus reviews that has become a bible and which is now also a smartphone app.